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Isn't 25% very less for 5 year term, assuming even FDs can get you a ~50% returns in 5 years?

Two replies of 25 percent plus growth. Aren't folks really setting themselves up for disappointment here?

The Indian market has logged growth of about 16 percent compounded over each of the past 10, 20, 30 years timeframes -- but that was also because it was extremely under-valued in the 80s and 90s (for understandable reasons) on every parameter: PE, market-cap to GDP, etc.

Even if we do assume India continues to grow at 13-15 percent nominal growth (7-8 percent real + 6-7 percent inflation), it should lead to a similar growth in the market's earnings-per-share, assuming PE ratios don't expand further.

Now if your portfolio beats the market by more than 10 percent for a consistent enough time, we would rival the likes of Warren Buffett (beat S&P by 10%), or Anthony Bolton or any of the greatest money managers in history.

Even from a financial theory standpoint, given India's 8 percent historical returns for fixed-income investors, you are expecting a 17 percent premium for taking equity risk?

Rakesh Jhunjhunwala, for instance, has gone on record several times to say he would be a very happy man if his portfolio grows by 18-22 percent CAGR from hereon (including dividends). Can't find a link to a story though.

Remember, the more alpha (returns over the index) you seek, the more portfolio risk you will have to incur via concentrated bets. In that case, you should know your companies really inside out.

As Buffett says, risk comes from not knowing what you're doing.

That's 25 percent compounded growth. Which should result in 200 percent absolute growth -- or Rs 100 increase to Rs 300 in five years. I think you're referring to 50 percent absolute growth for FDs (8.45 percent compounded).

And 25 percent CAGR growth is kind of mind-boggling to the point of unreal. (That's not to say it cannot be achieved during bursts of hyperbolic short-term performances that both equities and real estate often witness -- but I am referring to the really long-term.)

Hi Latheesh, I haven't looked at this com, but the ROEs seem to be too low for a 5-10 year period. Margins are fine, the Debt/Equity ratio is high, so I presume its a highly capital intensive business. Textile exporting companies are having a good run, my pick remains Kitex.

Hi, yes I attended the AGM (lasted just 10 mins!) and luckily got to meet some top management execs. This year growth might be lower than 20% as per the com, but they expect 25% growth from next year onwards. They have global market share of 38% in ETC (electronic throttle control) motors. ETC constitutes 85% of sales currently. EGR is the next growth driver with similar opportunity size and margin profile. EGR is gas re-circulation system.

I cannot post the full details here, its too long. Overall I am impressed with the conservative and capable management, their product profile, competitive positioning and future prospects. I have 4% allocation as of now and am looking to increase after further analysis (hopefully my "analysis paralysis" would not lead to another missed opportunity :))

Ajanta Pharma came out with stellar results. The way the company is increasing its margins through better working capital management is impressive. Just compare margins of this company with the best of the best and peers of similar size.

Hi everybody.
Around 10 years back I heard Mr. Sauvik Trivedi state that in a few years time the sensex will touch 10000. He spoke with great conviction and with the zeal of a prophet. The anchor, Mr.Mukherjee, heard him out with a very condescending look and an expression that said that he was humouring him.
Well, now it is 25000 +.
Well another forecast.The sensex will touch 50000. When it happens I don't know but whenever it happens please do remember that you read it here first. :)
Regards

If you want to make predictions, you have to give a time frame. Because, if Sensex reaches 50,000 after, say 10 years, it means we have got 7% CAGR per annum - which is less than what you get from a bank fixed deposit! :)

By the way, there's a website called www.crowd.in - where you can make short term Nifty predictions and win up to Rs. 1 Lac every week.

Any views on Sutlej and Loyal textiles?

Hi Rajesh,

Not much idea about those two. But Loyal has huge debt (D/E ratio at 5 times) and Sutlej promoter has pledged 28% of his shares. I do not touch such companies.

I have heard good things about KPR Mills. One of the analyst who was present for the Kitex meeting told that the best factory he has seen by far is Kitex and after that KPR. Apparently all the others are way behind.

ICRA upgraded its rating for Kitex from A- to A+ yesterday, that's up two notches. As per them not a single textile firm has even A rating, leave alone A+.

We have heard of much higher forecasts, more than a month back on TV18. :)
A target without the time factor, is meaningless.

Here is a link for one of the forecast, saying it will hit 100K by 2020.

https://www.youtube.com/watch?v=zSFoH0ejc1w

Thanks for the quick reply. Have read long back about how employees in KPR use skate shows to move around. Here is one link from Telegraph.

http://www.telegraph.co.uk/news/worl...of-labour.html

Smartcatcat/JMaruru
Hi.
Oops. I forgot to mention. Around two and a half years back there was an article in the Economic Times. His reasoning was based on the premise that our country will become a trillion $ economy. Giving some figures the writers contention was that the investment as a %age of GDP will rise and a certain part of it will go into equity.
Totally agree about the timeframe.
I have a vague recollection of seeing the interview in bits and pieces. 2020 is just 6 years away. Personally I hope I see 50k. Will see it after I finish this reply.
Regards
PS: Smartcat. Hi. I think it was M. Twain who said that predicting the future is a dangerous game. I firmly believe it.
PPS: I don't patrticipate in any such contests.Too old for that :)

Now the yanks decide to bomb Iraq, and the market bombs and Brent shoots up. Nikkei has also bombed.

Thanks for the reply VindyWheels. Hope that you would post the details about AGM meet and your analysis part in valuepickr.

Hi All, Reviving this thread after a gap of almost 2 weeks. There's lots happening in the stock market. Nifty touched 7900 and Sensex is nearing 26500. The market is super bullish. But I am not that very comfortable with the way it is surging ahead. I think there could be a big correction. Any views from the experts?

I anticipate that unless there is something really unexpected bad event unfurls, the markets will continue inching ahead, perhaps more slowly, perhaps with few up and down kinks.

Remember that everyone in this world is greedy and unsatisfied. Everyone would want to park their money where it grows. (Although the irony is that when everyone does it, everyone actually remains at same level with respect to others - the same funda is applicable to housing/real estate appreciation).

So even though everyone might know that markets are overvalued and it might be risky to invest, everyone will still nevertheless keep pumping in the money.

UNLESS, someone/something causes panic reaction. That's when hell breaks loose, and everyone wants to convert investments to cash. Which means everyone wants to sell, but no one wants to buy.
Now for someone who is investing based on fundamentals - it should not bother at all.
Market movement is simply price opportunity of entry for them. (If the market is down, it is an excellent opportunity to pickup the selected stock, if the market is up, then you need to be ultra confident about your analysis)

If you are investing based on technicals - you would flow more or less with the market, and buy when majority of everyone else just starts buying (= when the markets have begun rising), and sell when majority of everyone just starts selling (= when markets have just taken a down turn). Of course you may also sell when you appetite has been satiated.